Explaining the Liquidity Trap
- AS, A-Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 26 Apr 2019
The liquidity trap is a useful concept to use when evaluating the effectiveness of changes in monetary policy in achieving macroeconomic objectives. In this revision video we look at what a liquidity trap is, what can cause it and consider four ways in which macroeconomic policy might attempt to overcome a liquidity trap.